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Refinancing a Loan with Temporary Buydown Funds in Escrow
Question:
Can the remaining balances of temporary buydowns ever be refunded to the borrowers when refinancing or even used towards any closing costs?
Answer:
It certainly can and MUST…
Disposing of Buydown Funds:
If the mortgage is liquidated or the property is sold during the buydown period, the lender should dispose of the buydown funds in the following manner:
- The Mortgage Is Paid in Full – The funds should be credited to the total amount required to pay off the mortgage, or they may be returned to either the borrower or the lender as specified in the buydown agreement.
- The Mortgage Is Foreclosed – The funds are used to reduce the mortgage debt.
- The Property Is Sold, and the Mortgage Is Assumed by the Purchaser – The funds may continue to be used to reduce the mortgage payments under the original terms of the buydown plan.